Buying Property in Portugal? Don’t Forget About the Currency
Finding the right property in Portugal is often the part of the buying process people spend the most time thinking about.
Which area? Apartment or villa? Algarve, Lisbon, Porto or somewhere quieter? How much should you offer?
But for international buyers, there is another part of the purchase that can have a surprisingly significant impact on the eventual cost of the property: the currency used to pay for it.
If your savings are held in US dollars, British pounds, Canadian dollars or another currency but the property is priced in euros, agreeing to buy a €500,000 property doesn't necessarily tell you exactly what that property will ultimately cost you.
Your euro price may be fixed.
The amount of your home currency required to buy those euros isn't.
And that's why it can be useful to think about currency before you reach the point where your lawyer tells you a large payment is due.
A €500,000 property isn't always a fixed-price purchase
Imagine you've agreed to buy a property in Portugal for €500,000.
If all your funds are already held in euros, calculating your purchase cost is relatively straightforward.
But if your money is held in dollars or pounds, you effectively have two prices to consider:
the agreed property price in euros, and
the amount of your own currency required to purchase those euros.
Exchange rates move continually.
Sometimes those movements are small. At other times, political events, economic data, interest-rate expectations and changes in investor sentiment can cause currencies to move considerably.
On an everyday transfer, a relatively small change in the exchange rate may not seem particularly important.
On a property purchase involving hundreds of thousands of euros, it can be.
Why exchange rates matter when buying property in Portugal
Suppose your Portuguese property costs €500,000.
If EUR/USD were at 1.15, purchasing €500,000 would require approximately $575,000.
If the rate moved to 1.10, the same €500,000 would require approximately $550,000.
That's a difference of around $25,000 without the property's euro price changing at all.
The same principle applies if you're converting GBP, CAD or another currency into euros.
Of course, currencies can move in either direction. A movement may make your property cheaper in your home currency as easily as it can make it more expensive.
The important point isn't trying to predict exactly what the market will do.
It's understanding that currency is part of your property budget.
When should you start thinking about currency?
Ideally, earlier than many buyers do.
You don't necessarily need to exchange all your money as soon as you start viewing properties.
However, understanding your currency position before making an offer can give you a much clearer picture of your actual purchasing power.
For example, if you're looking at properties between €400,000 and €500,000, knowing approximately what those prices represent in your home currency can help you set a more realistic budget.
It can also help you understand what would happen if the exchange rate changed before completion.
This becomes particularly important when there is a significant period between agreeing to purchase and making the final payment.
Your property purchase may involve several payments
Buying a Portuguese property isn't always one single transfer.
Depending on the purchase, buyers may need to make payments at several stages.
These can include a reservation payment, deposit, stage payments on a new development, completion funds, taxes, legal costs and other professional fees.
That means your currency requirement might look something like:
Today: reservation payment
Next month: deposit
Three months: another property payment
Six months: completion, taxes and fees
Rather than viewing each transfer in isolation, it can be useful to consider the whole payment schedule.
Once you know approximately how many euros you'll need and when you'll need them, you can start considering how you want to manage the currency side of the purchase.
Do you have to transfer everything at once?
No.
There are several ways an international property buyer can approach their currency requirement.
One is simply to exchange funds at the prevailing exchange rate when each payment becomes due.
Another is to exchange some of the required currency earlier and leave the remainder until later.
Depending on your circumstances, it may also be possible to fix an exchange rate for a future payment using a forward contract.
A forward contract can be useful when a buyer knows they'll need a particular amount of euros at a later date and would prefer certainty over what that future payment will cost in their home currency.
There are advantages and considerations with each approach, so the appropriate option depends on your circumstances, payment schedule and attitude towards currency risk.
The important thing is that you know those options exist before the payment deadline arrives.
Should you wait for a better exchange rate?
This is one of the questions international buyers ask most often.
Unfortunately, nobody can guarantee what an exchange rate will do next.
Markets respond to everything from inflation and employment figures to central-bank decisions, elections and geopolitical developments. Trying to identify the absolute best moment to exchange your money can therefore become another form of market speculation.
A more useful question can be:
"What exchange rate do I need for this property purchase to remain comfortably within my budget?"
That changes the conversation.
Instead of trying to beat the market, you're managing a real financial commitment.
For some buyers, certainty is the priority.
Others are comfortable leaving some currency exposed to future movements.
And some choose a combination of the two.
Transferring money to Portugal
Another consideration is where your euros actually need to go.
During a Portuguese property purchase, funds may need to be transferred to your own Portuguese bank account, your lawyer's client account, a developer or another appropriate recipient connected with the transaction.
This is worth establishing in advance.
You should also check payment deadlines and bank details carefully with the relevant professional involved in your transaction.
Large international payments aren't something you want to organise for the first time the afternoon before completion.
Planning a property purchase in Portugal?
If your savings are held in USD, GBP, CAD or another currency, you don't have to wait until your first major payment is due to start planning.
Moving Currency helps international property buyers understand their currency requirements, plan upcoming payments and transfer funds throughout the property-buying process.
Speak to Claire about your property purchase →
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What information should you have ready?
You don't need to have completed the entire property-buying process before speaking to a currency specialist.
Even approximate information can be useful.
If possible, know:
the approximate property price in euros
the currency your money is currently held in
approximately how much you expect to transfer
when your deposit or next payment is due
your expected completion date
whether there are additional stage payments
If you haven't found the property yet, that's fine too.
Knowing your approximate budget and timescale can still help you understand how currency movements could affect your purchasing power.
Don't leave currency until completion day
International property purchases involve a lot of moving parts.
Estate agents, lawyers, banks, mortgage providers, surveys, contracts, tax numbers and seemingly endless pieces of paperwork can all demand your attention.
It's therefore understandable that currency sometimes gets pushed towards the bottom of the list.
But if you're buying a significant asset in a currency different from the one in which you hold your wealth, your exchange rate can materially affect the final cost.
You don't need to become a currency-market expert.
You simply need to understand your exposure, know your options and have a plan for when your payments become due.
Because when you're buying a €500,000 property in Portugal, the question isn't only:
"How much is the property?"
It's also:
"How much will those euros ultimately cost me?"
Buying property in Portugal?
If you're planning to transfer money from USD, GBP, CAD or another currency into euros, speak to Moving Currency before your next property payment is due.
Tell us the amount you need in euros, the currency you're currently holding and approximately when you'll need to make the payment, and we'll talk you through the options available.
Talk to Claire about your property purchase
No obligation. Just straightforward, personal guidance about the currency side of your purchase.
About Moving Currency
Moving Currency specialises in foreign exchange and international payments, helping international buyers manage currency transfers for overseas property purchases.
Founded by Claire Wheatley, Moving Currency provides personal support throughout the property-buying process, from initial planning and deposits through to stage payments and completion.